The lead results from your company's home show participation are in. The good news is that those lead costs are way below your average. The bad news is that your figure is probably wrong.
If you can't calculate the accurate, total cost for each marketing campaign, you won't be able to determine your costs for each lead source. If your lead source numbers are wrong, then you could be spending a lot more on marketing than you think. And marketing is one of the biggest line item costs at many home improvement companies.
“Lots of people are spending hundreds of thousands of dollars, or even millions, on marketing,” says Mark Leen, vice president of Mark Four Enterprises, in Fairfield, N.J. “And at the end of the day, they don't know what they're getting in return.”
WHAT IT IS The fully loaded marketing cost consists of “every part and piece that goes into making a lead,” says Fred Finn, president of Euro-Tech, a window and siding company in Bensenville, Ill. The cost of a show lead, for instance, includes space rental, building the booth, manning it, and warm-call follow-up. And more. “I hear people say: ‘We have a 6% marketing cost,'” Finn says. “And I'll say: ‘Does that include your marketing manager's salary?'”
Failing to consider every part and piece could leave you with a figure as much as 50% off in determining an accurate marketing cost.
Some campaigns are more easily tracked than others. Chris Ripley, CEO of Lifetyme Exteriors, in Boston, points out that 85% of the fully loaded costs of newspaper, television, or radio leads consists of the actual media purchase itself, with the remaining 15% allocated to warm-call follow-up and lead setting.
But consider canvassing or show leads. Media expenditure for a show lead might be 3% or 4% of its actual cost — the printed materials you use — with the remainder divided among many components.
Even leads with seemingly clear-cut costs can be off. You thought that pay-per-lead Internet lead was $40? It's $60 or $65 after someone has called or e-mailed the prospect 15 times to set an appointment.
WHO DOES WHAT, WHEN? Software can account for much. For instance, the program used by Mark Four Enterprises allows detailed cost control of each campaign. The company, which sells a broad menu of home improvement products, assigns a code and sometimes a phone number to each campaign. The system, Leen says, “automatically generates for us our cost per lead, our cost per sale, gross sales dollars, net sales dollars, and what our advertising ratio is for that particular campaign.”
But while knowing raw campaign costs is extremely useful, it still leaves managers with the problem of accounting for more nebulous expenses, such as how much of a particular employee's time should be included as a marketing expense.
At Mark Four Enterprises, expenses such as salaries become part of the company's fixed costs, and are allocated across the board based on the cost of marketing each product.
Ripley suggests clearly defining roles and responsibilities. Make it one person's job to answer the phone, not everyone's, so that that time can be easily earmarked as a marketing expense. And know what goes where. For instance, if your office is open 10 hours a day but you extend office hours an additional two hours while people answer phones and schedule appointments, add a fifth of general overhead to your marketing expense. “Scheduling is a function of marketing,” Ripley says, “so 20% of your general overhead — the cost of running the office those extra hours — should go there.”